Variable costs have constant cost per unit.
CMR = ($200k-$150k) / $200k = .25
Sales_BE = $30k / .25 = $120,000
High activity = 950 MH; Low activity = 720 MH, so:
($9625-$8360) / (950-720) = $5.50/MH
Either FC (top) must decrease or CM/unit (bottom) must increase.
Only B achieves this.
FC = 90,000 x $4 = $360k and doesn’t change.
So cost at 85k units is…
($8 x 85k) + $360k = $1,040,000
Option 1 is pure FC
Option 2 is both FC and VC
Option 3 is pure VC.
Answer D is only true for a low level of sales.
Production Budget:
Current month 48,000
+ EndInv Needed (40% x 51,000)
- BegInv on hand (40% x 48,000)
= 49,200
Sales forecast must be completed to do the Sales Budget, which is the first budget in the Master Budget.
AQxAP-------------AQxSP--------------StdAllowedxSP
$176k
80k x SP
76k x SP
??
$9400U
SP x (80k – 76k) = $9400, so SP = $2.35
$176k – (80k x $2.35) = $12,000F DM Price Variance
t of the cost driver is what distinguishes Standard Costing from Normal Costing (which uses actual amount of the cost driver).
By definition.
AHxSR--------------StdAllowedxSR
AH x $12
9,500 x $12
$6,000F
-$6,000 = $12 x (AH – 9,500), so AH = 9,000 hours
Actual VOH------AQxSR--------------StdAllowedxSR
??
AQ x $5
(19,500 x 3) x $5
$21,000F
$9,000U
(AQ x $5) – (19,500 x $5 x3) = $9,000, so AQ = 60,300 hours
Actual VOH – (60,300 x $5) = -21,000, so Actual VOH = $280,500
/unit stays constant.
Total FC stays constant, so as volume goes up, FC/unit goes down.
R
2
indicates the a lot of the variability in the cost is explained by variability in the cost driver.
Wtd Avg CM = 2/3 x ($40-$24)+1/3($50-$40) = $14
Target Units = ($840k + ($73,500 / (1-.3))) / $14
= 67,500
A = 67,500 x 2/3 = 45,000 units | …so none of the
B = 67,500 x 1/3 = 22,500 units |
above.
AHxSR--------------StdAllowedxSR
14k x $11
(7,500 x 2) x $11
??
(14k x $11) – (7,500 x 2 x $11) = $11,000 F
all else equal, there is less CM to contribute toward covering FC and generating operating income.
the weighted average CM, thus increasing the total CM which contributes to higher operating income.
DM Budget:
Current month (1,100 x .5)
+ EndInv Needed (10% x 980 x .5)
- BegInv on hand (10% x 1100 x .5)
= 544 ounces
And 544 ounces x $360/ounce = $195,840
AHxAR----------------AHxSR
$456,000
24k x $19.20
??
$456k – (24k x $19.20) = $4,800 F
Actual VOH-------------AQxSR
$77,700
18,800 x $4.50
??
$77,700 – (18,800 x $4.50) = $6,900 F
Target Units = ($80k + ($42k / (1 - .4))) / ($120 - $80)
= 3,750 units
So, none of the above.
revenues, to make it easier to hit sales targets.
osts, to make it easier to operate without exceeding cost allowed in budget.
VOH has Spending Variance and Efficiency Variance.
FOH has Budget Variance and Volume Variance.
ld choose Option 4.